Clarifying Confusing Concepts: NOSTRO and VOSTRO Bank Account

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NOSTRO versus VOSTRO Bank Accounts (Ours & Yours) : Clarifying Confusing Concepts|Economics

Illustration: Clarifying Confusing Concepts: NOSTRO and VOSTRO Bank Account
  • NOSTRO & VOSTRO are used to describe the same bank account. The terms are used when one bank has another bank՚s money on deposit, typically in relation to international trading or other financial transactions
  • if a nostro in credit has a positive sign, then a vostro in credit must have a negative sign.
  • Nostro comes from the Latin word for “ours,” as in “our money that is on deposit at your bank.”
  • Vostro comes from the Latin word for “yours,” as in “your money that is on deposit at our bank.”
  • SWIFT refers to the Society for Worldwide Interbank Financial Telecommunications, a member-owned cooperative that offers safe and secure financial transactions for its members
  • Citibank (US) & GT bank (Nigeria)
  • From GT Bank՚s perspective, its U. S. dollar account with Citibank is a Nostro account. From Citibank՚s perspective, it is holding a Vostro account for GT Bank in U. S. dollars.
  • For both Nostro and Vostro accounts, the domestic bank, i.e.. , the bank that is holding the account, acts as caretaker for the account and is sometimes referred to as the “facilitator” bank.
  • Nostro accounts with debit balances are considered cash assets. Contrarily, Vostro accounts with a credit balance are considered liabilities.

Manishika